VZCZCXYZ0009
PP RUEHWEB

DE RUEHLI #3195/01 3541608
ZNR UUUUU ZZH
P 201608Z DEC 07
FM AMEMBASSY LISBON
TO RUEHC/SECSTATE WASHDC PRIORITY 6523
INFO RUEHC/DEPT OF LABOR WASHDC

UNCLAS LISBON 003195 
 
SIPDIS 
 
SIPDIS 
 
Labor for Brumfield 
 
E.O. 12958: NA 
TAGS: ELAB SMIG PO
SUBJECT: Portugal Labor Market Stagnates, Unemployment Soars 
 
 
¶1. (U) Summary: Portuguese labor union and employers' organizations 
agree that three main considerations affected Portugal's labor 
markets: immigration, labor laws, and training/education 
opportunities.  Labor union representatives stress that the 
Portuguese government's push towards "flexicurity" is at the center 
of current labor concerns and poses a threat for the future 
well-being of workers.  That this is true even though the Socialist 
Party is currently in power makes organized labor feel politically 
isolated.  The employers' association countered that the current 
regulations left employers ham-strung and unable to adapt to the 
demands of globalization. End summary. 
 
¶2. Over the last several years, Portugal has faced a large spike in 
unemployment (from 4.1 to 8.5 percent in six years according to 
Eurostat figures) and has struggled to keep up with other EU member 
States.  Portuguese labor union and employers' organizations agree 
that three main considerations affect Portugal's labor markets: 
immigration, labor laws, and training/education opportunities. 
 
Immigration 
----------- 
 
¶3. (U) In response to questions about the makeup of the Portuguese 
workforce, General Worker's Union (UGT) Director Secretary General 
Joao Proenca said that immigrants played an increasing role and now 
accounted for roughly 10 percent of Portugal's active workforce.  He 
viewed the trend as positive overall, both for the immigrants and 
for the Portuguese who had already moved away from the domestic 
service and construction industries.  Portuguese Industry 
Confederation (CIP) President Francisco Van Zeller mentioned that 
Portugal's immigrant community tended to be fairly well educated and 
able to integrate quickly.  Van Zeller noted that CIP was pressing 
the Portuguese government to consider adding temporary or seasonal 
visas to allow for the growing demand for immigrant labor.  He 
predicted that immigrant labor would become increasingly important 
given Portugal's low birth rate. 
 
Labor Laws 
---------- 
 
¶4. (U) The General Confederation of Portuguese Workers (CGTP) 
National Council Director Armando Farias stressed that Portuguese 
workers faced worse conditions, higher unemployment, and greater 
instability than in recent history.  Farias offered the unemployment 
rate, currently 8.5 percent, up from 4 percent in 2001, as an 
example.  He said the pressure was to maintain low wages, but that 
Portugal could not win a "rush to the bottom."  He proposed 
increased government investment in public infrastructure and an 
attempt to establish a national solution to problems rather than an 
EU-wide approach. 
 
¶5. (U) Proenca agreed that the labor laws needed adjustment, but 
suggested that a realistic approach to reduce the informal economy 
was the place to begin.  He stated that roughly 20 to 30 percent of 
Portugal's workforce do not pay taxes and avoid government 
institutions.  Given the lack of transparency in the informal 
sector, Proenca claimed that workers' rights were undermined by the 
clandestine labor force. 
 
¶6. (U) Van Zeller said that employees think the labor laws were not 
flexible enough to allow Portuguese companies to be competitive in 
the global market.  Praising "flexicurity," the Portuguese policy to 
make labor laws more adaptable, Van Zeller proposed adaptations to 
allow flexible work scheduling, geographic placement, and more 
liberal termination terms.  He commented that the Portuguese economy 
was made up of Small and Medium Enterprises (SMEs) and could best 
legislate by sector rather than using the same rules across the 
economy.  He conceded, however, that if the labor laws allowed too 
much flexibility then the small enterprises might band together and 
set the terms, locking the labor unions out of negotiations. 
 
Training/Education 
------------------ 
 
¶7. (U) Van Zeller asserted that corporate training usually tried to 
reach everyone and therefore failed to reward excellence and improve 
competitively.  Another barrier to training was that SMEs could not 
afford to have their workforce in training for long periods of time 
the way larger companies could.  He judged that Portugal had fallen 
about 10 years behind other EU nations and said even some new EU 
members enjoyed a better trained workforce. 
 
¶8. (U) UGT's Proenca expressed the most concern about the lack of 
training among Portugal's workforce.  He stated that the average 
Portuguese worker was trained on the job rather than in the 
classroom.  Although the on-the-job training offered usable skills, 
it was more difficult for workers to transfer without more formal 
education.  The European Union agreed to fund a technical training 
program for Portugal since the vocational skill set of Portuguese 
workers was, on average, 75 percent lower than the rest of the EU, 
according to Proenca.  CGTP acknowledged that the gap between 
Portugal and other EU nations was worrying, but stressed that the 
labor law was the most pressing concern. 
 
Aging Workforce 
--------------- 
¶9. (U) Both UGT and CIP officials raised concerns about Portugal's 
aging workforce.  CIP's Van Zeller said it was important to keep 
older workers in the workforce and suggested an increase in the 
retirement age from the current 62 to 65.  He also discussed social 
security reform and noted that the current system would collapse 
within a decade if not adjusted.  Portugal has one of the lowest 
birth rates in Europe, according to Van Zeller, and immigration was 
not enough to compensate.  Both Proenca and Van Zeller stressed that 
the current system was not sustainable, and confirmed the need for 
additional reforms. 
 
Agree to Disagree 
----------------- 
 
¶10. (SBU) Comment: Although each of the three groups hoped for 
improvements in the current labor outlook, and agreed on the 
importance of the immigrant presence, they remained in conflict on 
other issues. "Flexicurity" was a particularly sensitive issue for 
the interlocutors and they did not agree on what the plan aimed to 
accomplish or even how the process would work.  Portugal is unlikely 
to face the kind of turmoil that France faces over labor issues, but 
is similarly divided on the best way forward given current demands 
on the budget and the isolation of organized labor as a political 
force. 
 
STEPHENSON